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FOS proposals to clear the back-log - attractive or not?

18 October 2021. Published by Cory Gilbert-Haworth, Associate and Rachael Healey, Partner

The Financial Ombudsman Service (FOS) has proposed a temporary approach to the classification of certain complaints in an attempt to alleviate their complaints backlog exacerbated during the COVID-19 pandemic. The approach could see firms looking to pro-actively resolve complaints before a defined cut off date before FOS reaches a decision so that the complaint is recorded separately and not as a "change in outcome" (i.e. where a complaint has been rejected by a business and upheld by FOS). The consultation was open for a short two-week period between 4 and 18 October 2021.

FOS backlog

The consultation paper notes that FOS' prediction of 145,000 complaints for 2020/21 has been eclipsed by actual complaints of 237,000 – an increase of over 60%. The FOS attribute the increase against their anticipated number of complaints as being due to the difficulties posed by COVID-19 on financial businesses. 

While the FOS says it has closed 99% of non-PPI complaints FOS set out to resolve last year, there were almost 90,000 complaints still waiting to be investigated. 

The FOS' approach to recording complaints

The FOS publishes yearly complaints data, quarterly complaints statistics and individual financial business complaints data twice a year. The data that makes up the latter of those publications identifies the 'uphold rates' of the complaints that FOS receives, recorded against each financial business. The FOS' rationale for classifying complaints is:

  • A complaint is recorded as having a 'change in outcome' if the complaint is resolved by the FOS, specifically, with a more favourable customer outcome.  Typically, where it was rejected by the business and upheld at FOS: or
  • Complaints are considered and recorded as 'no change in outcome' if the complaint is resolved with FOS agreeing with the financial business' original assessment of a remedy, or they simply decline to uphold the complaint.

The uphold rate is therefore calculated by using the percentage of the complaints received that are recorded as having a change in outcome  by the FOS under this assessment.

The FOS considers that such publicly available information increases transparency, helps to inform consumer choice, and provides an incentive to businesses to improve their complaint handling.

FOS' proposal

The consultation proposes a temporary change in this approach. The idea being, to encourage firms to take a proactive stance on settling complaints, by allowing firms a temporary reprieve on any negative recording for settling a complaint.

This will be achieved by recording the outcome of each complaint as neither a 'change in outcome' nor a 'no change in outcome', but as a separate category altogether. The change in the approach to recording data will also allow financial businesses to gain insight into FOS' approach as well.  The paper says that FOS will assist businesses with their review by providing context about FOS' open stock of complaints, including, for example, providing product-specific uphold rates and advice on which areas of complaint the FOS would likely uphold.

The option to actively settle complaints would be available provided there is no FOS decision.  Instead of the complaint being allocated to a case handler for investigation under the usual process, the new scheme would mean that existing back- logged complaints are ring-fenced and set aside to allow financial businesses to assess their stock of complaints. Businesses would then be able to settle claims, by informing the FOS of this intention and the FOS would then communicate this to the consumer.

The FOS advise that there are some situations where this approach may not work. Specifically, in cases where there is a vulnerable individual involved where the FOS does not want the resolution of complaints to be any delayed further and so reserves the right, in such cases, to proceed with the consideration of any complaint even if it is within the scope of the proposal. FOS has also raised queries with stakeholders on how FOS handle offers made by financial businesses where they have not reviewed the complaint as FOS would not be in a position to comment on whether the offer is a "fair one".  The consultation paper sets out that in circumstances where offers are made that FOS cannot assess it will say that it cannot confirm whether the offer is a fair offer or not.

The scheme is set to only last temporarily and it is proposed to stop at the end of the financial year (i.e. March 2022).

Attractive or not?

FOS' acknowledgment of the backlog it faces must be welcomed; the fact complaints are stuck at FOS often for years is clearly unsatisfactory for complainants and firms alike.

FOS clearly hopes that the proposal to record settled complaints under a different category will encourage firms to pro-actively resolve complaints in the window proposed.  Whether that will prove to be the case remains to be seen; given the complaints will still be recorded in FOS' data and so presumably identifiable as a settled complaint anyway seems to offer little if any carrot to firms.

That said, the offer from FOS to share uphold rates on certain product types may be of more general assistance and if FOS is willing to share further data against which firms can consider whether to proactively settle complaints then this may be more persuasive for firms looking to ease their own complaint caseloads.

A final decision on the consultation will be presented by 1 November 2021.  So not long to wait.